PSD3: The Future of Payments - Where ESG, Segmentation, and Innovation Meet

Contributor Satya Sai Saranya R Debasis Chakraborty

?As the European Union introduces PSD3 (Payment Services Directive 3), it marks a transformative moment for financial services, payment providers, and businesses. PSD3 not only strengthens regulations around fraud and security but also opens new opportunities in customer segmentation, product marketing, and ESG (Environmental, Social, and Governance) initiatives. Let’s take a closer look at how PSD3 reshapes the landscape

What’s the ESG Angle Here?

At first glance, payments and sustainability might seem unrelated, but PSD3 brings them closer together. One key area is the "Governance" aspect of ESG. With stricter fraud prevention measures and clearer transparency around payment processes, PSD3 aligns perfectly with strong governance principles. For instance, Strong Customer Authentication (SCA) is set to become more rigorous, which helps companies build trust with their customers by reducing risks associated with online transactions.

Moreover, from an environmental perspective, PSD3 encourages digital transactions over traditional, paper-based systems. Think about it: reducing physical paperwork, streamlining digital processes — this all ties back to lowering carbon footprints, something that aligns with corporate sustainability goals. Open Banking, which is a big part of PSD3, allows for innovative, eco-conscious financial products, such as "green" investment accounts or loans geared towards sustainability projects. This is where finance meets environmental responsibility.

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How Will PSD3 Shape Customer Segmentation?

One of the most exciting aspects of PSD3 is how it enhances customer segmentation. The directive’s expanded Open Banking capabilities give financial institutions a much richer dataset to work with. This allows payment service providers (PSPs) to better understand their customers, segmenting them based on behaviour, needs, and preferences.

For example, with more data at hand, banks and fintechs can create targeted products for tech-savvy younger generations, while offering simplified, secure payment solutions for older, non-digitally native customers. PSD3 mandates that authentication systems be accessible to all, including vulnerable groups like the elderly or those less comfortable with technology.

By focusing on these specific segments, businesses can develop personalized experiences that cater to diverse customer needs.

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How Can Companies Market Their Products Under PSD3?

Marketing in the world of PSD3 will undoubtedly focus on two key things: security and personalization. Given the enhanced regulations around fraud prevention, businesses can confidently market their services as secure and trustworthy. For many consumers, particularly in the digital space, knowing that their payment service provider offers top-tier fraud protection will be a strong selling point.

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Furthermore, the depth of data now available through Open Banking means that companies can personalize their marketing like never before. Imagine receiving investment or savings advice tailored specifically to your spending habits. This personalization increases customer engagement and builds loyalty, giving businesses a competitive edge.

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What About Monetization Strategies?

PSD3 opens new possibilities when it comes to generating revenue. With better access to customer data, companies can introduce premium services — personalized financial insights, enhanced fraud protection, or exclusive investment products — all of which customers might be willing to pay for.

Additionally, the removal of cumbersome fallback mechanisms that previously allowed banks to bypass third-party interfaces opens up a smoother integration with non-bank PSPs. This streamlined process fosters innovation, enabling faster product launches and more efficient partnerships between banks and fintechs

Whether through subscription models, premium fraud detection services, or innovative partnerships, there’s a lot of room for new monetization strategies to flourish.

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The Takeaway

PSD3 is far more than just a regulatory update — it’s a step toward creating a more secure, inclusive, and innovative financial ecosystem. From its alignment with ESG goals to its influence on customer segmentation, marketing strategies, and monetization, PSD3 reshapes how businesses approach payments in the digital age. It’s not just about compliance — it’s about capitalizing on new opportunities while building stronger, more sustainable relationships with customers.